Consortium Securities (P) Ltd.,, v. ACIT, Circle-3(1),,

MA 343/DEL/2010 | 2001-2002
Pronouncement Date: 14-01-2011 | Result: Allowed

Appeal Details

RSA Number 34320124 RSA 2010
Assessee PAN AAACC3251C
Bench Delhi
Appeal Number MA 343/DEL/2010
Duration Of Justice 6 month(s) 13 day(s)
Appellant Consortium Securities (P) Ltd.,,
Respondent ACIT, Circle-3(1),,
Appeal Type Miscellaneous Application
Pronouncement Date 14-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 14-01-2011
Assessment Year 2001-2002
Appeal Filed On 01-07-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH E DELHI ] BEFORE SHRI R. P. TOLANI JM AND SHRI K. D. RANJAN AM MISC. APP. NO. 343 (DEL) OF 2010. [ IN I. T.APPEAL NOS. 75 & 684 (DEL) OF 2005 ] ASSESSMENT YEAR : 200102. CONSORTIUM SECURITIES PVT. LTD. ASSTT. COMMISSIONER OF INC OME-TAX 36 SANT NAGAR EAST OF KAILASH VS. W A R D : 3 (1) N E W D E L H I 110 065. N E W D E L H I. PAN / GIR NO. AAA CC 3251 C. ( APPLICANT ) ( RESPONDENT ) ASSESSEE BY : SHRI VED JAIN C. A.; DEPARTMENT BY : SHRI INDERJIT SINGH SR. D. R.; O R D E R. PER K. D. RANJAN A.M. : THIS MISC. APPLICATION BY THE ASSESSEE HAS BEEN FI LED AGAINST THE CONSOLIDATED ORDER DATED 23 RD APRIL 2010 PASSED BY THE ITAT FOR ASSESSMENT YEAR 2001-02. 2. IT HAS BEEN SUBMITTED THAT THE ASSESSEE AS A BRO KER ENTERS INTO PURCHASE AND SALE TRANSACTION ON BEHALF OF THE CLIENTS. WHILE MAKING PURCHASES THE ASSESSEE MAKES PAYMENT TO THE STOCK EXCHANGE OF THE PURCHASE AMOUNT AND THEN DEBI TS THE AMOUNT OF PURCHASES PLUS BROKERAGE TO THE ACCOUNT OF THE CLIENT. THE BROKERAGE INCOME SO EARNED FROM THE CLIENT IS CREDITED TO 2 MISC. APP. NO. 343 (DEL) OF 2010. BROKERAGE ACCOUNT. THE DEBIT THUS IN THE ACCOUNT O F THE CLIENT REPRESENTS PURCHASE COST PLUS BROKERAGE. THEREFORE THE DEBIT BALANCE IN THE CLI ENTS ACCOUNT REPRESENTS AMOUNT DUE ON ACCOUNT OF PURCHASES MADE ON HIS BEHALF AND PLUS BROKERAGE INCOME EARNED. THE BROKERAGE INCOME EARNED IS SHOWN IN THE PROFIT AND LOSS ACCOUNT. TH E BROKERAGE INCOME SO EARNED FROM THE CLIENT DURING THE YEAR WAS AT RS.7 34 51 983/- WHICH IS E VIDENT FROM THE PROFIT AND LOSS ACCOUNT AVAILABLE ON RECORD. THE LD. CIT (APPEALS) AFTER E XAMINING THE FACTS HAS GIVEN A FINDING OF FACT EXPLAINING THE NATURE OF ENTRIES IN THE BOOKS OF AC COUNTS WHEREBY HE HAS HELD THAT BROKERAGE INCOME SHOWN IN ITS PROFIT AND LOSS ACCOUNT WILL NO T MEAN THAT SALE PROCEEDS HAVE NOT BEEN INCLUDED IN THE PROFIT WHILE COMPUTING ITS INCOME. WHEN THE APPEAL WAS ARGUED THE LD. SR. DR SUBMITTED THAT THE DEBIT BALANCE IS THE CREDIT FACI LITY EXTENDED TO THE CLIENT AND AS SUCH NOT ALLOWABLE AS BAD DEBT. HE FURTHER SUBMITTED THAT I N THE CASE OF CIT VS. BONANZA PORTFOLIO LTD. 226 CTR 468 (DEL). HONBLE DELHI HIGH COURT HAS CA TEGORICALLY HELD THAT THE BAD DEBT OF A SHARE BROKER SHALL BE ALLOWABLE DEDUCTION UNDER SEC TION 36(1)(VII) READ WITH SECTION 36(2) OF THE ACT. HOWEVER WHILE DECIDING THE APPEAL THE TRIBUN AL IN PARA 10 OF THE ORDER HAS HELD THAT PROFIT ELEMENT IN RESPECT OF DEBTS WRITTEN OFF HAS NOT ENT ERED INTO COMPUTATION OF TOTAL INCOME AND ACCORDINGLY CONDITION OF SECTION 36(2) OF THE ACT A RE NOT SATISFIED. AS MENTIONED ABOVE THE LD. CIT (APPEALS) HAS GIVEN A FINDING OF FACT TO THIS F ACT AND IT WAS NEVER A CASE OF THE LD. SR. DR THAT THE DEBIT BALANCE DID NOT INCLUDE BROKERAGE AM OUNT. 3. IN VIEW OF THE ABOVE FACTS IT HAS BEEN SUBMITTED THAT THE JUDGEMENT DELIVERED BY THE TRIBUNAL ON THIS CASE IN THE CASE OF THE ASSESSEE H OLDING THAT CONDITIONS OF SECTION 36(2) OF THE ACT HAVE NOT BEEN COMPLIED WITH ARE IN CONFLICT WIT H THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. BONANZA PORTFOLIOS LTD . (SUPRA). 4. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH THE ORDER PASSED BY THE TRIB UNAL AND THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. BONANZA PORTFOLIOS LTD . (SUPRA). WE FIND THAT THE TRIBUNAL WHILE DECIDING THE ISSUE IN PARAGRAPH 10 HAS MENTIONED TH AT IT IS ALSO A FACT THAT THE BROKERAGE INCOME ON TRANSACTIONS WHICH HAS BEEN CLAIMED AS BAD DEBT HAS NOT BEEN ACCOUNTED FOR. THEREFORE THE 3 MISC. APP. NO. 343 (DEL) OF 2010. PROFIT ELEMENT IN RESPECT OF DEBTS WRITTEN OFF HAS NOT ENTERED INTO COMPUTATION OF TOTAL INCOME. ACCORDINGLY CONDITION SPECIFIED IN SECTION 36(2) OF THE ACT HAS NOT BEEN SATISFIED. THE TRIBUNAL SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING O FFICER WITH THE DIRECTIONS THAT THE ASSESSING OFFICER SHOULD EXAMINE THE CASE OF THE ASSESSEE UND ER SECTION 28 OF THE ACT WITH A VIEW TO DECIDE AS TO WHETHER THE AMOUNT OF RS.4 71 67 460/- REPRES ENTS A BUSINESS LOSS IN THE HANDS OF THE ASSESSEE. NOW IN THE MISC. APPLICATION THE ASSESSE E IS CLAIMING THAT THE BROKERAGE INCOME ON THE TRANSACTIONS HAS BEEN CREDITED TO THE PROFIT AND LO SS ACCOUNT. WE ALSO FIND THAT HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. BONANZA HAS HELD THAT PROVISIONS OF SECTION 36(2) OF THE ACT WILL BE APPLICABLE IN THE CASE OF SHARE-BROKER. IN VIEW OF THESE FACTS WE FEEL IT PROPER TO MODIFY THE DIRECTION ISSUED EARLIER TO EXAMINE THE ISSUE A LSO TOGETHER WITH EARLIER DIRECTION REGARDING LOSS AS TO WHETHER THE BROKERAGE INCOME ON TRANSACTIONS WRITTEN OFF AS BAD DEBTS HAVE BEEN ACCOUNTED FOR OR NOT. IN CASE THE BROKERAGE INCOME HAS BEEN ACCOUNTED FOR THE ASSESSEE WILL BE ELIGIBLE FOR DEDUCTION UNDER SECTION 36(1)(VII) OF THE ACT AS CO NDITION OF SECTION 36(2) STANDS SATISFIED IN THE CASE OF SHARE BROKERS AS PER THE DECISION OF HONBL E DELHI HIGH COURT IN THE CASE OF CIT VS. BONANZA PORTFOLIOS LTD. (SUPRA). THIS ORDER WILL F ORM PART OF THE CONSOLIDATED ORDER DATED 23 RD APRIL 2010. IN THE LIGHT OF THE ABOVE THE MISC. APPLICATION FILED BY THE ASSESSEE IS ALLOWED IN THE TERMS INDICATED ABOVE. 5. IN THE RESULT THE MISC. APPLICATION FILED BY TH E ASSESSEE IS ALLOWED IN THE TERMS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON : 14 TH JANUARY 2011. SD/- SD/-. [ R. P. TOLANI ] [ K. D. RA NJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 14 TH JANUARY 2011. *MEHTA * 4 MISC. APP. NO. 343 (DEL) OF 2010. COPY OF THE ORDER FORWARDED TO: - 1. APPLICANT. 2. RESPONDENT. 3. CIT (APPEALS); 4. CIT 5. DR ITAT NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR ITAT.